Triple leveraged drawdown selling rule

[vbin]

BMY, Teva, mrk, cvs, wba, glexo, cah are few still undervalued. I think I own a few other names as well.

Lmt, noc, hii, GD were all deals a month back. Still cheap comparatively but not on sale.

[vbin]

Sold ABBV, TEVA, BMY puts.

[ken-do-nim]

(04-06-2021, 12:48 PM)vbin Wrote: Sold ABBV, TEVA, BMY puts.

You know that scene in Raiders of the Lost Ark, "They're digging in the wrong place."  That's what this reminded me of 

[ken-do-nim]

Good article on owning triples and the trailing stop percentage which I didn't even know existed! https://seekingalpha.com/article/4059820...rofit-from

[fenders53]

He may never see this post unless you tell him. I will point out those are pretty decent trades though. Not his fault you don't know how to sell puts. J/K

[ken-do-nim]

Yeah, well right now I'm learning about trailing stop % and trailing stop prices so one day at a time Trailing stop price is exactly what I was looking for, and answers the "what if I go on vacation" question nicely. Instead of just tracking the sell-if-it-falls price in a spreadsheet, I will enter these trailing stop price sales, and Etrade will do this for me automatically.

[fenders53]

(04-06-2021, 06:49 PM)ken-do-nim Wrote: Yeah, well right now I'm learning about trailing stop % and trailing stop prices so one day at a time  Trailing stop price is exactly what I was looking for, and answers the "what if I go on vacation" question nicely.  Instead of just tracking the sell-if-it-falls price in a spreadsheet, I will enter these trailing stop price sales, and Etrade will do this for me automatically.

That will work best if you get your strong run up front which it seems you did in 2020.  Picking the right stop will be an art as it is easy to get taken on a dip that only lasts a few weeks before the next ascent.  As the saying goes nobody ever went broke taking a profit.  You'll find the plan that is right for you.

[ken-do-nim]

I made a huge mistake the other day and I want to fess up about it. Last week, the sky was falling for a couple days and the drawdown cutoffs that I'd established for several triples were tripped. I ended up selling NAIL, though I held onto others like SOXL. My thought process at the time was, NAIL has a history of huge drawdowns every other year or so. If it is at the start of one of these, that's what my rule is for. If it were to continue falling past my cutoff, I'd have no one but myself to blame for not enforcing my own rule. So ... I sold.

The problems with this outcome are as follows:
1) I sold after 11 months of owning; 1 month shy of qualifying for long term capital gains tax. I just gave myself a huge tax bill for next year because I quadrupled my money. Between my earlier mistake with VOO, and now this, that's $8000 of short terms capital gains, and that's after the MARA and HIBL losses. (E*Trade has a tab which tells you.)
2) I didn't assess the situation properly. The first 2 weeks of April represented a huge run up, and the market just needed to let off some steam. There's nothing fundamentally wrong at this time with Home Depot, Lowes, or Sherwin Williams that will represent a massive drawdown for NAIL. And lo and behold, it's right back up where it was before that 2 day drop.

Verdict: when in a taxable account, before selling due to a price point cut-off, really assess the situation. I panicked when I shouldn't have.

[fenders53]

Ouch. Yes you have to pay attention to holding dates in a taxable account. The good news is it's April. Playing with triples so it is highly likely you will have some down eventually. Rotate into something else about identical for 30 days and offset the gains with losses. You only have to wait 30 days to re-enter to avoid violating the wash rule.

[ken-do-nim]

I've already re-entered in the ROTH, though I still want to increase my stake back to former levels. I don't think NAIL or LABU ever come back to the taxable account, given their history. The remaining triples in my taxable account I've deemed "safer", either because massive drawdowns are unlikely outside of a pandemic starting, or because they bounce right back.

Edit: Also, due to the $8000 short terms capital gains, it limits how much company stock I was planning to liquidate this year. Maybe none

[fenders53]

(04-27-2021, 01:23 PM)ken-do-nim Wrote: I've already re-entered in the ROTH, though I still want to increase my stake back to former levels.  I don't think NAIL or LABU ever come back to the taxable account, given their history.  The remaining triples in my taxable account I've deemed "safer", either because massive drawdowns are unlikely outside of a pandemic starting, or because they bounce right back.

Edit: Also, due to the $8000 short terms capital gains, it limits how much company stock I was planning to liquidate this year.  Maybe none

DGI is at home in a taxable account.  Pay the taxes on your dividends and rotate the high drama stuff to a non-taxable account as you can because taxes driving your buys and sells encourages bad decisions.

[ken-do-nim]

Exactly. So gosh, $8000 short term cap gains + $3000 at least in dividends this year = $11,000 I have to pay full taxes for, x .35 = $3,850 in taxes. I usually get a $2k refund so this will put me in the hole as is. Yeah, doesn't look like I get to sell any company stock this year. And I probably need to start reading up on Estimated Tax Payments.